DE BEERS UK LTD, MUMBAI V. ASST DIT (IT) 1(2), MUMBAI

ITA 5525/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8591 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 30-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 01-09-2014
• Court: TRIBUNAL
• Keywords: Question of law; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.5525/M/2014 (AY 2005 - 2006) ITA NO.5526/M/2014 (AY 2006 - 2007) ITA NO.5527/M/2014 (AY 2007 - 2008) ITA NO.5528/M/2014 (AY 2008 - 2009) DE BEERS UK LIMITED, (FORMERLY KNOWN AS THE DIAMOND TRADING COMPANY LIMITED) C/O. M/S. SRBC & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SENAPATI BAPAT MARG, DADAR, MUMBAI - 28. / VS. DEPUTY DIRECTOR OF INCOME TA X (INTERNATIONAL TAXATION) - 1(2), SCINDIA HOUSE, MUMBAI. ./ PAN : AACCT5530B ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI P.J. PARDIWALA / REVENUE BY : SHRI JABIR CHOUHAN, CIT - DR / DATE OF HEARING : 02.02.2017 / DATE OF PRONOUNCEMENT : 08 .02.2017 / O R D E R PER BENCH : THERE ARE FOUR APPEALS UNDER CONSIDERATION. ALL THESE APPEALS ARE FILED BY THE ASSESSEE INVOLVING THE ASSESSMENT YEARS 2005 - 06 TO 2008 - 09. SINCE, THE ISSUES RAISED BY THE ASSESSEE IN THESE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBE D, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THE ORDER. 2. IN ALL THE FOUR APPEALS, ASSESSEE RAISED IDENTICAL GROUNDS AND THEREFORE, FOR THE PURPOSE OF ADJUDICATION AND REFER ENCE SAKE, THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO.5525/M/2014 ARE EXTRACTED AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 2,33,40,986/ - . 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD NOT CONCEALED PARTICULARS OF INCOME IE MARKETING CONTRIBUTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD NOT FURNISHED INACCURATE PARTICULARS OF INCOME IE MARKET CONTRIBUTION. 4 . THE LD CIT (A) ERRED IN CONFIRMING THE APPLICATION OF PARAGRAPH (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. 5. THE LD CIT (A) ERRED IN NOT APPRECIATING THAT MARKET CONTRIBUTION HAS BEEN TAXED DUE TO DIFFERENT VIEW ADOPTED DURING THE ASSESSMENT PROCEEDINGS. 3. FURTHER, BEFORE US, ASSESSEE FILED AN ADDITIONAL GROUND , WHICH IS IDENTICAL IN ALL THE FOUR APPEALS AND THE SAME READS AS UNDER: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN LEVY ING PENALTY U/S 271(1)(C) OF THE ACT WHEN PROPER SATISFACTION FOR INITIATION OF PENALTY AND FOR ISSUE OF NOTICE WAS NOT RECORDED BY HIM, AND ALSO WHEN THERE WAS NO CLARITY IN HIS MIND AS TO WHICH LIMB, IE CONCEALMENT OF PARTICULARS OF FURNISHING INACCURAT E PARTICULARS WAS APPLICABLE, AT THE LIMB OF INITIATING THE PENALTY AND ALSO THE TIME OF ISSUE OF NOTICE. 4. THE COMMON ISSUE RAISED IN THESE APPEALS RELATES TO THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT WHEN THE PENALTY NOTICE ISSUED U/S 274 OF THE A CT SUFFERS FROM THE DEFECT OF NON APPLICATION OF MIND BY THE AO WITH REGARD TO STRIKING OF / DELETING OF THE RELEVANT LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT. THOUGH THE GROUNDS IN ALL THESE APPEALS ARE RAISED IN DIFFERENT LANGUAGE, THE ARGUMENT S RAISED BY THE LD COUNSEL FOR THE ASSESSEE BEFORE US REVOLVES AROUND THE ABOVE. 5. BEFORE US, AT THE OUTSET, SHRI P.J. PARDIWALA, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE NO. 56 / 57 OF THE PAPER BOOK (NOTICE U/S 274 R.W.S 271 OF THE ACT) AND SUBMITTED THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND AND DID NOT STRIKE OF THE RELEVANT LIMB FOR WHICH THE PENALTY NOTICE WAS ISSUED U/S 271(1) OF THE ACT. TO SUBSTANTIATE THE ABOVE, LD AR ALSO BROUGHT OUR ATTENTION TO THE ASSESSMENT ORDER O F THE AO AND READ OUT THE FOLLOWING (PAGE 8 OF THE ASSESSMENT ORDER) . FOR CONCEALING THE PARTICULARS OF INCOME PENALTY PROCEEDINGS U/S 271(1)(C) ARE SEPARATELY INITIATED. 6. LD AR ALSO READ OUT THE FOLLOWING FROM PAGE 9 OF THE ASSESSMENT ORDER: - PENALTY PROCEEDINGS U/S 271(1)(C) IS ALSO INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME THEREBY CONCEALING INCOME. 7. FURTHER, BRINGING OUR ATTENTION TO THE PENALTY ORDER DATED 16.03.2012 IN GENERAL AND FOURTH LINE OF PARA 5 IN PARTICULAR, LD AR READ OUT THE FOLLOWING: - 3 5......THE ADDITION .......IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 8. CONSIDERING THE ABOVE, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE AO IS NOT CLEAR ABOUT THE PROVISIONS FOR WHICH AO LEVIED THE PENALTY, THEREFORE, IT IS A CASE OF NON APPLICATION OF MIND BY THE AO TO SUCH AN ISSUE RELATING TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 9. REFERRING TO TH E CONSEQUENCES OF SUCH NON APPLICATION OF MIND BY THE AO, LD AR BROUGHT OUR ATTENTION TO THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH CONNON AND GINNING FACTORY (359 ITR 565), WHICH IS RELEVANT FOR THE PROPOSITION THAT PENALTY PROCEEDINGS DOES NOT SURVIVE WHEN THE AO FAILED TO DELETE FROM THE STANDARD PROFARMA OF THE RELEVANT CLAUSES, SUCH FAILURE LEADS TO AN INFERENCE AS TO NON - APPLICATION OF MIND. FURTHER, MENTIONING THAT SUCH JUDGMENT HAS OBTAINED THE APPROVAL OF THE HONBLE SUPREME COURT, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS [2016] 73 TAXMANN.COM 248 (SC), WHICH IS RELEVANT FOR THE ABOVE LEGAL PROPOSITION. LD AR ALSO RELIE D ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY IN IT APPEAL NO.1154 OF 2014 AND OTHERS DATED 5.1.2017 AND SUBMITTED THE ABOVE LEGAL PROPOSITION WAS APPROVED BY THE JURISDICTIONAL HIGH COURT. 10. ON HEARING BOTH THE PARTIES, WE HAVE PERUSED THE SAID EXTRACTS FROM THE ORDERS OF THE AO AND FIND THAT THE CONFUSION IN THE MI ND OF THE AO IS OBVIOUS FROM THE SAID EXTRACTS. THE CONSEQUENCE OF SUCH A MESS IN THE MINDS OF THE OFFICERS IS NOT APPROVED BY VARIOUS JUDICIAL FORUMS INCLUDING THAT OF THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS THE HONBLE APEX COURT. IN THIS REGARD, WE HAVE PERUSED THE LEGAL PROPOSITION IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) AND THE SAME READS AS UNDER: - WHERE TRIB UNAL, RELYING ON A DECISION OF KARNATAKA HIGH COURT, ALLOWED APPEAL OF ASSESSEE HOLDING THAT NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) WAS BAD IN LAW, AS IT DID NOT SPECIFY UNDER WHICH LIMB OF SECTION 271(1)(C) PENALTY PROCEEDINGS HAD BEE N INITIATED AND HIGH COURT, ON APPEAL, HELD THAT THERE WAS NO SUBSTANTIAL QUESTION OF LAW ARISING FOR DETERMINATION, SLP WAS TO BE DISMISSED. 11. FURTHER, WE HAVE ALSO PERUSED THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHRI SAMSO N PERINCHERY (SUPRA) AND FIND THE CONTENTS OF PARAS 6 4 AND 7 ARE RELEVANT. CONSIDERING THE SIGNIFICANCE AS WELL AS FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID RELEVANT PORTIONS OF PARAS 6 AND 7 OF THE HIGH COURTS JUDGMENT ARE EXTRACTED AS UNDER: - 6........THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT / PERMIT PENALTY BEING IMPOSED FOR THE OTHER B REACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED / NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NOT NOTICE. 7. THEREFORE, THE ISSUE HEREIN STANDS CONCLUDED IN FAVOUR OF THE RESPONDENT - ASSESSEE BY THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GI NNING FACTORY (SUPRA). NOTHING HAS BEEN SHOWN TO US IN THE PRESENT FACTS WHICH WOULD WARRANT OUR TAKING A VIEW DIFFERENT FROM THE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FACTORY (SUPRA). 12. CONSIDERING THE ABOVE BINDING JUDGMEN T ON THE ISSUE / ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE, WE FIND, THE ORDER OF THE CIT (A) IS REQUIRED TO BE REVERSED. FOR THE SAID REASONS, PENALTY HAS TO BE DELETED FOR THE AY 2005 - 06 IN ITA NO.5525/M/2014. ACCORDINGLY WE ORDER. 13. IN RESPECT OF THE OTHER THREE APPEALS (ITA NOS.5526, 5527 & 5528/M/2014) FOR THE AYS 2006 - 07 TO 2008 - 09, SIMILAR ARGUMENT WAS PUT FORWARD BY THE LD COUNSEL FOR THE ASSESSEE AND RELIED HEAVILY ON THE NON - APPLICATION OF MIND BY THE AO ON THE SAID NOTICE ISSUED U/S 274 R.W.S 271(1) OF THE ACT AND FI ND IDENTICAL APPROACH OF THE AO AS INESCAPABLE OBSERVATION. IN ALL THESE THREE APPEALS TOO, AO FILED TO STRIKE OF RELEVANT LIMB FOR WHICH THE PENALTY WAS INITIATED. CONSIDERING THE COMMONNESS OF THE ISSUE WITH THAT OF THE ON E ADJUDICATED BY US IN ITA NO.5525/M/2014, IN THE ABOVE PARAS OF THIS ORDER, WE FIND, SIMILAR VIEW SHOULD BE TAKEN IN RESPECT OF THE PENALTY IN THESE THREE APPEALS TOO. ACCORDINGLY, PENALTY LEVIED IN THE APPEALS FOR THE AYS 2006 - 07 TO 2008 - 09 IS DELETED. CONSEQUENTLY, THE GROUNDS RAISED BY THE ASSESSEE IN ALL THE FOUR APPEALS ARE ALLOWED ON THE ABOVE TECHNICAL GROUND. 14. CONSIDERING THE OUR DECISION ON THE LEGAL ISSUE, WE ARE OF THE OPINION, THE ADJUDICATION OF THE OTHER GROUNDS RAISED ON MERITS BECOMES AN ACADEMIC EXERCISE. ACCORDINGLY, RELEVANT GROUNDS RAISED BY THE ASSESSEE IN ALL THE FOUR APPEALS ARE DISMISSED AS ACADEMIC. 15. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 5 ORDER PRONOU NCED IN THE OPEN COURT ON 08 TH FEBRUARY, 2017. SD/ - SD/ - ( RAVISH SOOD ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 08.02.2017 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI